Do the Gains from International Migration “Go to the Immigrants”?

This morning, Justin Rowlatt of BBC World Service asked me a smart interview question: Sure, there are economic gains to migration, but don’t most of those gains simply go to the migrants?

We were discussing a new paper of mine on the global economic gains to international labor mobility. The latest and best economic research shows that the gains from even small reductions in worldwide barriers to migration would add trillions of dollars a year to the weakened global economy. That’s more than the world would gain from the total removal of all remaining policy barriers to trade and every last barrier to capital movement.

Much of this gain arises because workers from some poor countries are several hundred percent more productive when they move to richer countries. But that’s not the same as saying that most of the gains “go to the migrants”.

To see why, imagine your reaction if I told you that the United States and the global economy are vastly more productive and prosperous today than they would have been if there had been no immigration to the United States since 1900. Then imagine that I added: “but most of those gains went to the immigrants”.

If I said such a thing you would be right to be puzzled. First, many of those immigrants aren’t alive anymore, but their immigration caused their non-immigrant descendants to be in the United States, adding more value than if they’d grown up and worked elsewhere. That gain is included in the estimates of the economic gains caused by migration. Roughly one quarter of the U.S. population has an immigrant grandparent, including me. And much more than that have an immigrant great-grandparent or great-great grandparent—probably including you, if you live in the United States. In other words, the gains I discuss are the gains to all people caused to be one place rather than another, by an original act of migration. Before long, the majority of people directly caused to have higher productivity by migration are not, themselves, migrants. Soon, “they” are “we”.

Second, even if we could somehow cordon off those descendants, we would be mistaken to measure their gains in isolation. It would be like saying that the economic gains from the immigration of Google founder Sergei Brin are limited to the increase in living standards experienced by Brin himself and his son. All immigrants and their descendants interact economically with non-migrants. Brin helped create a company—and, in part, an industry—that employs large numbers of non-migrants. Every dollar that all those people spend has an “economic multiplier”: their spending raising earnings and job prospects for people who produce the thing purchased, and when those people spend their incomes… so on, ad infinitum. Moreover, apart from stars like Brin, lower-skill workers convey a range of economic benefits to non-immigrant workers, including lower their cost of living, raise female labor force participation (see this and this), and raise the productivity of investments in new business. All of those effects, too, are included in any proper accounting of the gains to migration.

Third, and most obviously, many migrants send large fractions of their income back to the countries they came from. These flows sustain major portions of all the economic activity happening in Ecuador, the Philippines, and Kazakhstan. Dean Yang has a nice review of the latest research on those flows and their huge impacts on development.

The research discussed in my paper measures the gains to the world economy, not to specific individuals. And they measure the gains at an unspecified future time, perhaps far off, relative to how the economy would have fared without migration up to that time. Those gains are spread across vast numbers of people. At the very moment a migrant worker gets his or her first paycheck in the destination country, it is right to say that the majority of the gain goes to the migrant. But from that instant onwards, things get much more complicated.